USA destroyer sails in disputed South China Sea amid trade talks

"I think there's a very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues". USA officials have repeatedly accused China of not fulfilling agreements, with Ross saying on Monday that 'the real issue is what are the enforcement mechanisms, what are the punishments if people don't do what they were supposed to do?'

A member of the United States delegation said the two sides would resume talks on Wednesday as they continue their first face-to-face meetings since Trump and Chinese President Xi Jinping agreed to a tariff truce during a meeting in Argentina on December 1.

The U.S.is looking to crack down on China's business practices, including allegations of technology theft along with slashing the trade deficit and getting more access to Chinese markets.

Talks between mid-level USA and Chinese officials in Beijing were extended for a third day into Wednesday, adding to optimism fueled by tweets from Trump that the two sides are making progress toward an agreement.

A person familiar with the matter tells CNN that negotiators between the world's two largest economies needed more time to discuss issues that were part of the agenda.

Lu Kang, spokesman for China's foreign ministry, said on Monday that Chinese military aircraft and naval vessels were dispatched to identify the United States vessel and warn it to leave the area near the disputed Paracel Islands in the South China Sea, claimed by China. Beijing responded by imposing penalties on $110 billion of American goods, slowing customs clearance for USA companies and suspending issuing licenses in finance and other businesses.

China has made "stern representations" to the USA after an American destroyer sailed through waters claimed by Beijing in the disputed South China Sea.

"Talks with China are going very well!", Trump tweeted on Tuesday, the latest in a series of upbeat messages from him on the negotiations since both his meeting with Xi and the December market turmoil.

Financial markets have begun the year hanging on the outcome of talks between American and Chinese officials in Beijing. There the two agreed to a temporary relief from any tariffs increases and China agreed to put focused effort into trade negotiations over a 90-day period.

Few details have emerged from the trade talks, which are scheduled to run through Tuesday.

Even so, Lu said, "China's development has ample tenacity and huge potential".

The White House is making sure this go-around is different.

The trade spat has been a major overhang and the effects of tariffs on billions of dollars of goods have started showing up in economic data and a reduction in analysts' estimates for earnings growth rates at S&P 500 companies. China responded by imposing penalties on $110 billion of American goods, slowing customs clearance for USA companies and suspending issuing licenses in finance and other businesses.

He is expected to meet chief U.S. Trade Representative Robert Lighthizer later this month.

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